Spokane7
55°
July 3, 2011 in City, Idaho
Avista customers feel shock over yearly rate-hike requests
A team of Avista workers installs new lines at Cowley Street and Short Avenue in Spokane on June 22.
(Full-size photo)
Pending request
Avista Corp. is asking Washington regulators to approve a 9.3 percenthikein residential electric rates and a 5.1 percent hike for natural gas service by next spring. For the average residential customer in Washington, monthly electric bills would go up $7.13, for a total of $84.14. Monthly gas bills would go up $3.26, totaling $66.71. Avista is evaluating whether to seek similar rate hikes in Idaho.
Public comment
The Washington Utilities and Transportation Commission is accepting comment on the rate case. Comments can be sent to comment@utc.wa.gov or P.O. Box 47250, Olympia, WA 98504-7250.
More info
Read Avista’s rate case at www.utc.wa.gov. Look for Dockets UE-110876 and UG-110877.
Shari Hicks recently sent a poignant email to the Washington Utilities and Transportation Commission.
“Why, at a time when everyone else is having to make do with what’s available, are Avista and their shareholders wanting more, more, more?” asked the Veradale resident.
Nearly 200 customers of the Spokane-based utility have written or called Washington regulators to voice their views on Avista’s latest request for a 9.3 percent increase in electric rates and a 5.1 percent hike for natural gas. The overwhelming majority opposed the request, which would add about $120 a year to a typical household’s electricity and natural gas bills.
Customers are cutting back on spending, and their hometown utility should follow suit, they said. Instead, Avista is asking for its fourth rate hike in four years.
The company’s goal of boosting shareholders’ profits to 10.9 percent also hit a nerve.
“Avista is like the Sheriff of Nottingham character from Robin Hood,” wrote one disgruntled customer.
But Avista officials say that need – not greed – is driving the annual rate-hike requests. The utility is facing a collision of factors that is driving up costs without adding revenue, including the need to replace millions of dollars worth of aging equipment, said Kelly Norwood, Avista’s vice president of state and federal regulation. That’s put pressure on ratepayers, he acknowledged.
He also defended Avista’s goal of boosting shareholders’ profits. The company competes with other utilities for investors, who help finance Avista’s capital investment through stock purchases.
Avista anticipates the yearly requests for higher rates to continue.
Norwood said it’s a much different era than the late 1980s through the late 1990s, when Avista sold surplus power to California. Rates were stable for nearly a decade.
“We don’t like raising rates, either. We hate it,” said Jessie Wuerst, an Avista spokeswoman. “But you’ve got to maintain a company.”
The company has outlined its case for higher electric and gas rates in hundreds of pages of testimony filed with the Utilities and Transportation Commission, the state agency that regulates investor-owned utilities. By mid-April, the three-member Utilities and Transportation Commission must rule on Avista’s request. In recent cases, the commission has granted at least part of Avista’s requests.
Meanwhile, customers such as Hicks are weighing in. The commission will also schedule meetings for public testimony. Avista’s industrial customers will look over the proposal, as will advocates for low-income families.
The proposed rate hike also faces scrutiny from the state attorney general’s Public Counsel Section, which advocates on behalf of residential customers and small-business customers in utility rate cases.
Simon ffitch, chief of the Public Counsel Section, said he sympathizes with customers.
“This revolving door approach to ratemaking is really a new phenomenon in the last decade or so,” he said. “For companies to publicly state that they’ll be filing a rate case every year is really very unusual and obviously very, very burdensome in this economy.”
Yearly requests for higher rates seem counterintuitive during recessionary times, ffitch said.
“Costs are flat. Inflation is flat. Growth is flat. Earnings are flat. Unemployment is high. But, somehow the utility companies need more money every year,” ffitch said. “We’re hoping the commission will take a hard look at these things.”
Avista isn’t alone in asking for yearly rate increases. Puget Sound Energy and Pacific Power, two other state-regulated utilities, are on a similar path. Equipment replacement is a key part of their rate requests.
“The companies, in general, have aged to the point where their infrastructure needs to be replaced,” said Mike Parvinen, assistant director for energy at the Utilities and Transportation Commission. “It’s putting cost pressure on their existing customers.”
Here’s a rundown of some of the factors Avista officials say are driving up costs:
Aging equipment: Most of Avista’s 1950s-era equipment is wearing out. Avista expects to spend $250 million replacing and upgrading old equipment this year and $1.2 billion over the next five years.
Though costs for steel, aluminum and cement are down from their peak, they’re still significantly higher than they were five to seven years ago, Norwood said.
In addition, the depreciation embedded in utility rates is based on original equipment price, so there’s sticker shock when the utility replaces something such as a 50-year-old transformer, he said.
Reliability: Avista and other utilities are under a national mandate to improve the reliability of their transmission system. The mandates followed the largest electrical blackout in U.S. history in 2003, which affected about 45 million people in the Northeast and Midwest.
Higher energy costs: When public utilities districts built dams on the mid-Columbia in the 1950s, Avista – then Washington Water Power – helped finance the construction in exchange for long-term contracts for cheap electricity. Avista used to buy about 10 percent of the electricity used by customers at cut-rate prices of 1 to 1.5 cents per kilowatt hour, Norwood said.
Those contracts began expiring in 2005. Some have been renegotiated, but at current market costs, which are about 4 to 4.5 cents per kilowatt hour.
Customer growth: Despite the economic slowdown, Avista’s customer base and demand for energy is growing at 1 to 1.5 percent per year. That requires building new electrical generation to serve customers, and it’s more expensive than getting power from existing plants, Norwood said.
Electricity from Avista’s new gas-fired Rathdrum Generating Station, for instance, costs about 7 cents per kilowatt hour.
Shareholder profits: Avista wants to increase profits for its shareholders, who finance about half of the company’s capital expansion through stock purchases. The rest of the money comes from borrowing. Avista is asking state regulators to boost the company’s allowed return on equity from 10.2 percent to 10.9 percent. Return on equity is the amount earned on a common stock investment. (Avista’s actual return on equity has ranged between 5.6 percent and 8.1 percent over the past five years, less than the amount allowed by state regulators.)
Avista is at a disadvantage when it competes for shareholders, Norwood said, because other state utilities commissions allow higher returns on equities.
Return on equity levels have been adjusted downward for Washington’s other investor-owned energy utilities. Puget Sound Energy has a 10.15 percent allowed return on equity. Pacific Corp.’s is 9.8 percent.
“The commission wants to set rates at levels that will allow the utility to attract investors,” the Utility and Transportation Commission’s Parvinen said. But if return on equity is set too high, then customers end up paying utility rates that are higher than necessary, he said.
“The commission tries to find that fine line,” he said. “It’s a balancing act.”
Miners to return to Lucky Friday 
DHF on July 03 at 5:32 a.m.
Avista will raise your rates and there is nothing you can do about it. They have a MONOPOLY and the Utilities Commission in their pocket. I am glad that I dont have Avista.
greyhound2 on July 03 at 5:36 a.m.
Avista needs to be changed from a private for-profit Wall Street corporation to a public utility like Seattle and other areas. Avista is currently beyond control.
drywitt99 on July 03 at 6:01 a.m.
“Avista’s latest request for a 9.3 percent increase in electric rates and a 5.1 percent hike for natural gas….which would add about $120 a year to a typical household’s electricity and natural gas bills.”
Com’on…..what’s a measily $120 a year???
Without THAT they might have to freeze employee wages???
Without THAT how could they pay for their employee bonuses???
And without those…..their employee’s morale might suffer??
Poor babies!
rosehips on July 03 at 6:12 a.m.
bah avista. bah avista shareholders.
the only good thing about these raises in rates is that it forces people to conserve. I can’t wait until solar becomes more affordable and we can all put collectors on our roofs and tell the utilities to take a flying leap.
We should be looking more at public utilities that don’t have to answer to greedy shareholders.
Ninch on July 03 at 7:41 a.m.
Wow… greyhound is proposing “nationalizing” a private utility. Can anyone say Hugo Chavez?
So everyone against paying higher utility rates is against reliable power? Just wait to hear them howling when their power goes out.
BTW: You can put solar collectors on your roof NOW, and sell the excess power to Avista. That is the current law. (Note: your meter will run backwards giving you credit).
rosehips on July 03 at 8:12 a.m.
ninch, I realize you can put solar on your roof, Unfortunately, it would take quite a considerable investment to generate enough power for a home plus extra to sell back.
so ninch, are you in support of Avista rate increases and bonuses and pay raises? Maybe you work for Avista, or perhaps you are a shareholder?
Zenman on July 03 at 9:08 a.m.
Think your rates are high? Check the Energy Information Administration website & you’ll see the power rates in the Northwest are some of the lowest in the nation.
Federal regulations are one of the biggest electricity cost-drivers today. Utilities across the country are required to unnecessarily spend new money to meet a unending march of rules pumping out from the EPA, Department of Interior, & Federal Energy Regulatory Commission. And the ratepayer is starting to cough up for this regulatory flood.
It was our president who said that under his plan electricity costs would “necessarily skyrocket”. He was right.
The federal regulatory chickens are coming home to roost….
Bruce (aka thatoneguy) on July 03 at 9:11 a.m.
Of course, if customers start conserving, the resulting drop in revenues will also be a reason to raise rates. Happens in Seattle all the time with water rates: the company itself tells people to conserve, then raises rates to compensate when people actually do conserve.
eagleproducer on July 03 at 9:15 a.m.
What a great business model, this private ownership of utilities. What other types of business can tell its shareholders they will receive a guaranteed profit of over 10% after having their “business plan” rubber stamped by a quasi-democratic functionary?
The increase would add $120.00 to the average customer’s electric and gas bill. What???? The “average” customer would then be paying Avista less than 100 per month. How many you pay an average of 100 per month for Avista’s services? I am down to about 1100 square feet and pay more than 150 per month on the “budget plan.” It’s freaking ridiculous.
There is a way out. All it takes to form a P.U.D. like Seattle’s and most rural counties in Washington is for a majority of rate payers to vote for the formation of a P.U.D. For more info, visit this Facebook page to start shoving Avista down the road.
http://www.facebook.com/home.php?sk=group_178750578809791&ap=1
And get rid of the Union workers, they MUST be behind all these rate increases.
eagleproducer on July 03 at 9:18 a.m.
zenman: False analogy. Avista generates most of their power using a free and renewable resource. That’s why rates are low, not because of their corporate benevolence.
Dan_at_Avista on July 03 at 9:31 a.m.
Zenman, I’m sure you’re referring to the hydro power as free, which if you walk up to the river and take out a bucket, its free. So sure, I get that. But electric producers who use these resources pay a significant amount for the right to operate there. In the last few years Avista secured a 50-year license to operate on the Spokane River. And regardless of your opinion about the resource being free - that license, costs a heck of a lot of money. Included in those costs are mitigation efforts, which I’m sure you’re aware of. Here’s a link to a 2009 blog post about the license. https://www.avistautilities.com/community/blog/archive/2009/06/19/new-50-year-ferc-license-on-spokane-river-signals-certainty-for-the-future.aspx
Despite the costs associated with hydro, we’re lucky to have that resource, which despite rising energy costs, has kept our rates lower than a significant portion of the rest of the country.
I’d be happy to get folks answers to their questions about energy or Avista, just e-mail me here: conversation@avistautilities.com
monkeyman on July 03 at 9:34 a.m.
@ Zenman on July 03 at 9:08 a.m.
“… the power rates in the Northwest are some of the lowest in the nation…”
Yeah, but could have something to do with the resources used for power generation? E.g. right now they are literally giving away free power due to the record generation from wind and hydro. Rest of the nation has to burn coal/gas for electricity.
Pigrobin on July 03 at 9:46 a.m.
Maybe I missed it but the article didn’t mention that when adjusted for inflation, the cost for electricity and natural gas is virtually unchanged over the last 50 years. At least, that’s what the charts depicted. I find that remarkable. I can see in the short term how rate increases look bad but here’s a private company that’s meeting the demands of it’s customers, providing a good living for its employees and paying back on the risk its investors are taking. I’ve lived in a lot of states and a few foreign countries and I can’t think of a place where the cost of electricity was cheaper. If you really think a public owned utility is better just move a few miles south or west of Spokane and you can have Inland Power as your electricity provider. It’s great to live in a free country.
mrd on July 03 at 9:47 a.m.
Dan, could you tell us where we can find information on wages and benefits for AVISTA employees?
Dan_at_Avista on July 03 at 9:58 a.m.
mrd, We’ve got more 2,000 Avista Corp. employees - around 1,500+ at the utility alone, so check out the other Spokesman article today for info on most of them. If you want executive compensation look at our 2011 proxy. Start on page 19: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9ODg2MTN8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
zelda on July 03 at 9:58 a.m.
Ten years ago during the Western energy “crisis,” we were told by Avista that the reasons were: 1) huge amounts of power being demanded by all those new-fangled server farms 2) all of our electronic gadgets were increasing the load 3) the Salmon Recovery Act 3) problems with a transmission line on the Calif/Ore border 4) low snowfall in the Sierras and a few other excuses I can’t recall.
Remember what the REAL reason was? Enron and energy speculation. There is zero reason to believe any reasons offered. Corporate credibility is shot.
A good thing to keep in mind when you see a laundry list of reasons offered by a corporation to explain a painful change — usually only one of those reasons is the one that counts. Notice how none of the reasons are weighted so we are left to conclude (they hope) that all are equal contributors to the need to raise rates.
@thatoneguy has got this figured out. The more we conserve, the more Avista needs to raise its rates to compensate for the loss of revenue. Plus, Avista has lost large paying customers due to The Great Recession. They will do whatever it takes to preserve the dividend. And they’re doing it by pushing costs back on the individual ratepayers.
Another big problem for them is salaries. No one leaves that place — its turnover rate is nil. So salaries and benefits keep rising and its gotten to the point where they can’t afford their own workforce. That’s a reason I don’t see listed.
jddavis on July 03 at 10:07 a.m.
Interesting that the price chart(s) that are in the print version don’t appear in the e-version. As Pigrobin stated, prices have been pretty even over the past 50 years (Time value of money) according to records.
liberal_in_right_wing_land on July 03 at 10:23 a.m.
Hey, these poor people running Avista and their stockholders have to pay the mortgage and be able to support their lifestyle somehow. I mean, really people, we cannot expect these CEO’s and others to stop playing private jets or first class, can we? These are powerful people, they need their privacy from the commoners and need their huge houses, private planes, first class seats, new car every 6 months and golf memberships to the finest and most private of country clubs.
Come on, I am sure these greedy bastards are suffering also, they are probably having to making do with only one illegal housekeeper instead of 2 right now.
zelda on July 03 at 10:35 a.m.
Where did they get an inflation rate of 4%? It’s nice when you can pull a number out of your, ahem, *hat* and make your chart (print version) look favorable.
I have not seen any figure that indicates that inflation is 4%. It’s actually about 2.7%.
Dazzeetrader11 on July 03 at 11:16 a.m.
Avista has a strngledhold on the Inland NW> Competition will bering rates down. Very much the monopoly . Something must be done. Their rate hikes are unsustainable. Something must be done. Getting financially mugged by using your own resources seems wrong. SPokane and its region arebecoming the target of robber baron types. There’s no regulation or end in sight. Power and it’s management when in the hands of one company needs to be fixed. Avista voted it’s own pocketbook. I”d begin by forcing the resignation of the Regulatory Board…….each and every one of them.
kkrimmer on July 03 at 11:39 a.m.
Utilities and other necessities should be nationalized or heavily regulated. Hell we subsidize tobacco farmers to grow poison, oil companies and hundreds of billions are spent on over-priced parts for the Pentagon ($.05 cent part cost the Pentagon $14).
geon on July 03 at 12:35 p.m.
It’s possible with the Zero-Percent-Intrest policy the Fed is running, the shareholders are just trying to earn a little money on dividends. You get “jack” for your savings in the bank. But, you have can refi or obtain a mortgage at some of the lowest interest rates on record, saving the average citizen thousands of dollars. Some folks can even live in their house without paying the mortgage for years, others get their mortgage principle reduced. Cash for clunkers–lots of new cars on the road.
It’s one messed up country.
SMARTGUY on July 03 at 3:08 p.m.
My only questions for dan the avista man, do you get paid to go on this forum? Or did your boss suggest it?
monkeyman on July 03 at 5:02 p.m.
@ SMARTGUY on July 03 at 3:08 p.m.
“My only questions for dan the avista man, do you get paid to go on this forum? Or did your boss suggest it?”
You and I pay for the his full time propaganda job - officially known as the Communications Manager at Avista since 2007. His job is to “educate” us.
monkeyman on July 03 at 5:14 p.m.
Open question - can we find Dan’s salary info somewhere, since Avista as an entity is somewhere between a private and “public” company?
In his own words his position was created after he pitched it to the management. It involves blogging, and monitoring websites to post “educational” comments on them.
I have asked him in the past regarding how I (as an Avista customer) can request the management for his job to be eliminated. (Well, I made the requests to Dan on this comment board. So not surprisingly, no response.)
On a related note - http://www.spokesman.com/stories/2011/may/21/red-light-camera-company-suspended-for-misleading/
At least we are dealing with someone real, I hope.
Dan_at_Avista on July 03 at 6:41 p.m.
Monkeyman, I’ll be at work on Tuesday at 8. Give me a e-mail and we can set up a visit. Come on in, see what we do. See if we’re worth what we’re paid. I’ve got no problem with that. Conversation@avistautilities.com I’ll be waiting.
zelda on July 03 at 6:52 p.m.
Why does Avista need Dan when they’ve got the S-R? Redundant, not efficient.
But honestly, he’s doing his job — and on a three-day weekend too. Flak-catchers are paid to fend off questions the execs don’t want to answer. But what the heck, if you can make a living doing “content analysis,” go for it. (I was going to say “more power to him” but the pun was too obvious.)
DickAdams on July 03 at 7:56 p.m.
Seems to me the posters are taking their eyes off the little white ball and not thinking about upper management at Avista. I love those huge bonuses. Thanks users.
westerly on July 03 at 9:07 p.m.
Still……. Avista is cheapest rates around…. and if everyone else is paying higher rates and not dieing by the millions..who cares if we raise rates.
idahocity on July 03 at 10:20 p.m.
don’t let them put a smart meter on your home. i still have an old meter that i am going to lock down. smart meters across the country have been overcharging people.
westerly on July 04 at 4:30 p.m.
Is Spokane the only city in America that has electricity rate hikes? Sounds like it …..get out of the box you live in… lol get over it..
D Statler on July 04 at 11:43 p.m.
We, the lifelong residents of the Inland Northwest have given up plenty for these low energy rates. The biggest salmon in the world use to swim the Spokane river. The jobs in the aluminum smelters have left because of the high energy rates also. I wish those of you that move here from California would zip it.Stop trying to change the things that make Spokane unique. The UTC along with the blessings of Rob McKenna’s office have alowed these unnecessary increases. AVISTA is just manipulating the books. These UTC frauds probably don’t even read the hundred page requests.They are too buisy responding to confidential deals and closed door negotiations. One needs look no farther than the UTC records. The Attourney Generals office shows up in Spokane representing both the UTC and ratepayers.No conflict of interest there tho. This is a sad senario that has no end in sight. As long as our elected officials keep getting campaign contributions from AVISTA. We better suck in our belts again and search GoodWill and the Salvation army for more winter blankets. Not a pretty picture I paint is it Dan? ThankYou friend :^(
greenlibertarian on July 05 at 10:38 a.m.
Very little signs of intelligent life on the thread.
arroyoribera on July 14 at 7:12 a.m.
To understand capitalist corporations today — and the Spokesman-Review’s condescendingly elitist perspective — read the 7/3/11 headline: Ratepayers feeling powerless (the headline was change in the online version). I’m sorry, S-R. Ratepayers ARE powerless. The article fails to provided a detailed history of Avista’s monopolistic rate hikes which Utilities and Transportation Commission “regulators” almost always approve. Meanwhile, following the online article, Avista’s corporate flak, aka “Dan_at_Avista”, whose comments now number 134, ridiculed critical commenters and ratepayers. Of course, Avista’s whining about needing to replace 50-year-old equipment goes unquestioned by the intrepid S-R reporter. Why haven’t Avista’s mega-millions in profits over the years produced such infrastructural investment? Hyper-capitalist economist Milton Friedman provided the explanation and this country’s true mantra, i.e., “the social responsibility of business is profit”, which has superceded “In God we trust”. Profit indeed. At all cost. Truth is, AVISTA’s corporate bosses are doing very well, thank you. The rest is corporate propaganda, slick wild west snake oil sales pitches, and champagne corks flying off the walls over corporate earnings reports. The US populace needs to understand: under capitalism you are nothing but a source of profit. Your economic suffering is your problem. The solution? Organize and fight back!